AHA not buying into OMHA’s backlog reduction plan

The American Hospital Association (AHA) submitted comments on August 26, 2016, on the HHS Proposed rule (81 FR 44456, July 7, 2016) intended to reduce the Medicare appeals backlog in the Office of Medicare Hearings and Appeals (OMHA), arguing that the proposal barely scratches the surface of the issue and “that merely tweaking the appeals system will not adequately address the problem.” At best, the AHA stated, the proposals would take five years to eliminate the backlog. The association cautioned that attorneys should only be permitted to adjudicate cases after thorough training and expressed concern with the lack of detail in the OMHA’s suggestion that certain decisions be designated as precedential.  It also rejected the OMHA’s proposals to eliminate the requirement that administrative law judges (ALJs) issue a decision within 90 calendar days of receiving a request for hearing and limit adjudicators’ ability to issue decisions without hearings when CMS or its contractor becomes a party to an appeal.

Proposed rule

The Medicare appeals backlog is a source of great concern for providers.  As of April 30, 2016, over 750,000 appeals were pending, while the OMHA only had the capacity to adjudicate 77,000 per year (with an additional capacity of 15,000 by the end of fiscal (FY) year 2016). The AHA noted that the most recent data reflect an increase in average processing time of 140 days—to 935.4 days, or two and a half years—since the beginning of FY 2016. In an effort to address this backlog, CMS issued a Proposed rule that would allow attorneys, in lieu of ALJs, to adjudicate certain decisions that would not go to hearing, and permit the Chair of the Departmental Appeals Board (DAB) to designate certain final Medicare Administrative Council decisions as precedential. However, it would also limit adjudicators’ ability to issue decisions without hearings when CMS or one of  its contractors becomes a party to a case and would eliminate the mandatory 90-day time period that adjudicators have to issue decisions.

AHA comments

Although the AHA conceded that the use of attorney adjudicators could address matters that do not require ALJ attention, including those decisions that can be issued without a hearing, those cases in which an appellant withdraws a request for hearing, and those appeals which must be remanded for information that can only be provided by CMS or a contractor,  it cautioned that attorneys must be properly trained to ensure they have “significant knowledge of and experience in applying Medicare regulations.”

The association was not accepting, however, of CMS’s proposal to allow the DAB Chair to designate select decisions that address repetitive legal and policy questions as precedential, and to designate factual decisions as precedential where relevant facts are the same and the underlying factual circumstances have not changed since the decision was issued. The AHA expressed “strong concerns” regarding the lack of specifics included in the proposal, noting, “it is difficult to evaluate the merits of the proposal, but easy to speculate how it could harm appellants if the process favors decisions that are beneficial to CMS.” Instead, it suggested gathering stakeholder feedback and engaging in future notice-and-comment rulemaking.

The AHA specifically opposed the proposal to amend 42 C.F.R. sec. 405.1016, which states that, after a qualified independent contractor (QIO) has issued a reconsideration, “the ALJ must issue a decision, dismissal order, or remand . . . no later than the end of the 90 calendar day period beginning on the date the request for hearing is received,” (emphasis added) by removing the word “must.” According to the AHA, the OMHA indicated that the requirement is not absolute, since appellants are statutorily permitted to escalate claims when the timeframe is not met.  The AHA referred to the reasoning as “too clever by half,” noting that amending the regulation would do nothing to eliminate the statutory mandate.

The association also rejected proposed changes to 42 C.F.R. sec. 405.1038(a), which currently states that ALJs may issue a decision without notice or hearing where the evidence on record “supports a finding in favor of appellant(s) on every issue.” According to the AHA, the proposed changes, which would prevent an adjudicator from issuing such a decision where CMS or its contractor chooses to become a party to the appeal, could allow contractors to force a hearing to justify inappropriate denials.

Ongoing issues

The AHA argued that HHS has refused to acknowledge that the backlog results predominately from “excessive inappropriate denials of claims by Medicare contractors, and specifically the Recovery Audit Contractors (RACs),” which have financial incentives for denying claims. While recognizing that the OMHA cannot control the RAC process, the AHA encouraged the agency to provide information about the process to Congress.  It also continued to urge the OMHA to:

  • delay recoupment of payments until an appeal is decided and prevent interest from accruing prior to a decision;
  • eliminate the one-year filing limit to rebilled Part B claims and allow hospitals to submit Part B claims within 180 days of a final Part A claim denial determination;
  • create a defined time period during which RACs may audit providers on a particular issue, after which RACs must petition CMS to perform additional audits on the issue, but only after a defined time period has passed, during which providers have been educated; and
  • codify, in regulation, a statement made in the FY 2014 inpatient prospective payment system Final rule that Medicare contractors may only evaluate the medical necessity of an inpatient stay based on “the information available to the admitting practitioner at the time of the admission” (78 F.R. 50495, August 19, 2013).

Hospital appeals settlement recipients identified by CMS

More than 2,000 hospitals that received almost $1.5 billion in total settlement money from CMS for fee-for-service denials based on patient status reviews for admissions prior to October 1, 2013, were identified by name, provider number, total claims settled, and amount of money received. The settlement, which was paid in 2015 at 68 percent of the net allowable amount, gave providers a guaranteed timely payment in exchange for withdrawing pending appeals that were tied up waiting through a large administrative hearing backlog. Settled claims numbers ranged from one to almost 3,000, with amounts paid between $0 and almost $16 million.

The settlement was a one-time offer by CMS to alleviate the burdens on the Medicare appeals system. The agency only settled claims for patients admitted prior to October 1, 2013, because it believed that the two-midnight rule, which began on that date, would reduce future appeals volume (see CMS offers partial payments for certain Part A hospital claims under appeal, Health Law Daily, September 3, 2014; CMS pays $1.3B to settle hospital inpatient claims, Health Law Daily, June 15, 2015).

The administrative hearing backlog remains a problem for CMS, which last month proposed regulations to improve the efficiency of the Medicare appeals process and address the increasing number of backlogged appeals waiting for administrative adjudication (Proposed rule, 81 FR 43789, July 5, 2016). The settlement offer was made nine months after Nancy Griswold, Chief Administrative Law Judge for HHS’ Office of Medicare Hearings and Appeals (OMHA), said that there were 375,000 claims waiting for adjudication and suspended new requests for hearings before an administrative law judge. As of April 2016, however, OMHA had over 750,000 pending appeals. The two-midnight rule, which did not have the desired effect of reducing appeals, has also ended after hospital backlash (see 1.5 percent payment cut overshadows end of Two-Midnight, Health Law Daily, August 3, 2016).

Kusserow on Compliance: GAO issues report critical of Medicare appeals process

The Backlog Saga Continues

The Government Accountability Office (GAO) conducted a review of the appeals process for Medicare fee-for-service (FFS) claims and issued a report in June 2016 that was highly critical of the Medicare appeals process. The process consists of four administrative levels of review within HHS, and a fifth level in which appeals are reviewed by federal courts. Appeals are generally reviewed by each level sequentially, as appellants may appeal a decision to the next level depending on the prior outcome. Under the administrative process, separate appeals bodies review appeals and issue decisions under time limits established by law, which can vary by level. They have not been meeting those deadlines for years. In fact, they have 700,000 pending appeals that would take years to clear up, even if new appeals were not filed.

The GAO found that CMS and two other components within HHS that are part of the Medicare appeals process have not made available full-use data collected in three appeal data systems to monitor the Medicare appeals process. It also found variations in how appeals bodies record decisions across the three systems, including the use of different categories to track the type of Medicare service at issue in the appeal. Absent more complete and consistent appeals data, the ability to monitor emerging trends in appeals is limited and is inconsistent with federal internal control standards that require agencies to run and control agency operations using relevant, reliable, and timely information. The GAO recommended that HHS take four actions, including improving the completeness and consistency of the data used by HHS to monitor appeals and implementing a more efficient method of handling appeals associated with repetitious claims.

Following the release of this report Nancy Griswold, Chief Administrative Law Judge, Office of Medicare Hearings and Appeals (OMHA), and Constance B. Tobias, Chair, Departmental Appeals Board (DAB), reported submitting a Notice of Proposed Rulemaking (NPRM) on changes to the Medicare claims appeal process as part efforts to eliminate the backlog of appeals currently pending at the OMHA and the DAB. The proposed changes designed to reduce the number of pending appeals and streamline the Medicare appeals process. They also sought increases in the budget for FY 2017 to add resources to work on the backlog problem.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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